Company is into two businesses - Jute goods and Captive power generation. Annual Report 2006 says that power generation contributes less than 10% of revenues and hence is not covered in the annual report. Jute goods include Jute Yarn, Sacking Bag and Canvas Bags.

Its products are used extensively in packaging. In India, GOI has made it mandatory to pack sugar and some other food items to be packed in jute bags. However more than 70% of revenues come from exports and even if these regulations are taken away by GOI, there would not be a major impact on earnings.

Since the entire jute industry has been facing losses, small competitors and most of the players in the unorganized sector have been forced to shut shops. Cheviot remains the lowest cost producer and one of the few companies left making money in the industry.

+ives

1.Company deploys excess cash in mutual funds and other companies. Subsequently company is sitting on Rs 212 cash per share (and this is at cost of investments – with market giving 46% return last year, the market value could be much much higher).

2.Current trading price is about 238. With 212 per share in cash, Cheviot can be effectively bought at Rs. 26 per share.

3.Promoter group holds about 73% of outstaying shares – may be a reason for their love of giving out generous dividends! It would have been interesting to know the dividend payout if promotes had only 27% holding in the company.

-ves

1.Jute industry has been given sops by GOI and in absence of these sops, profitability might come down. Most of the revenues come from exports and in case sops for packaging are taken away, Cheviot would still be unaffected.

2.There is no catalyst that might initiate the value unlock process. In case of Venkys, people just had to start eating chicken again. Here there is no such natural catalyst.

3.Labour issues in West Bengal are very sensitive. Strikes happen on whims and fancies of the union and might have some effect on operations of the company.

What is company doing with this excess cash - any buyback news, capex, heavy dividend .. ??? I can see some heavy dividend coming .. Rs. 8 as interim and say another 6 rupees in final would mean a dividend yield of 6.5% (quite good)

Hi guysthere are plenty of companies like this. Not sure on what basis should one value them. I have been following Nagreeka Exports for the last fear years. I stumbled across it a few years ago. It has a similar story. It has a huge inventory of stocks and mutual funds. In fact it had over 400000 shares of Sterlite Industies at a book value of 250. This is what sparked my interest. Since then the share has had a decent run up but it has never seemed to catch up to even come close to its book value. it went as high as 165+ ( perhaps more) , since then the company as spun off its investment arm as Nagreeka Capital. how ever asfter the demerger they combined value is only about 130 rupees. As far as i know the companies business ( cotton yarn exports) is doing well. The Shares that are in its portfolio ( as per last balance sheet) as also been performing well. However The share price has been sliding.

How does one value a company such as this? Im sure there are many such companies does it make sense to try and find them? what are your opinions?

please let me know

thanks

-TJ

ps i own shares of these companies.( nagreeka exports and nagreeka capital)

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Disclaimer: We do not give any stock recommendations. This is a collection of personal views and opinions on the Indian Stock Market.

We try to invest in the Indian stocks on the Value Investing principles and lessons from Warren E. Buffet, Charlie Munger, Prof. Benjamin Graham, Prof. Bruce Greenwald, Prof. Sanjay Bakshi and other value investors.

And there are times when we are blinded by the possibility of profits and do divert from deep value in stocks. We are imperfect in the way we research our stocks but we are trying to learn and this blog will be an archive of our experiments.